UK lenders raise mortgage rates amid warnings over inflation and energy prices - FT
TL;DR
UK lenders like Nationwide and HSBC are raising mortgage rates due to inflation fears from Middle East conflicts and high energy prices, with the Bank of England's upcoming decision under scrutiny. Analysts warn that sustained energy costs could push rates higher, advising borrowers to lock in rates early to avoid volatility.
UK lenders raise mortgage rates amid warnings over inflation and energy prices - FT
UK lenders have begun raising mortgage interest rates amid growing concerns over inflationary pressures linked to the Middle East conflict and elevated energy prices. Nationwide Building Society increased rates on select two-, three-, five-, and 10-year fixed-rate products by up to 0.25%, effective Friday, while HSBC UK and Coventry Building Society also announced rate hikes, citing shifts in financial market expectations for Bank of England (BoE) policy. These adjustments follow a rise in "swap rates," a key benchmark reflecting market forecasts for central bank interest rates, which have been influenced by geopolitical tensions and fears of higher inflation.
The BoE's March 19 rate decision will be closely watched, as prolonged volatility in oil and gas prices could delay anticipated rate cuts. Analysts warn that sustained energy cost increases may ripple through the UK economy, curbing price stability and forcing the BoE to reconsider its dovish stance. For instance, the National Institute of Economic and Social Research noted that persistent high energy prices could push BoE rates above 4%.
Current average fixed mortgage rates stand at 4.84% for two-year terms and 4.96% for five-year terms, according to Moneyfacts. Experts advise borrowers to secure rates promptly, as lenders may extend volatility until geopolitical risks abate. Karen Noye of Quilter highlighted that locking in rates up to six months in advance could mitigate future uncertainty. Meanwhile, UK house prices rose 0.3% in February, but inflation-related concerns remain a key drag on market confidence.
